Lithium Prices hit 35-month low as EV Market Stalls

Lithium prices have fallen to the lowest level for 35 months ($13,000 per ton), a drop of more than 80% from a record high of over $80,000 per ton in December 2022. 

Lithium is central to the burgeoning electric vehicle (EV) market and has for some time been at the centre of the geopolitics that surrounds clean energy. 

The price drop has been caused by a combination of factors, including oversupply and weakening demand for electric vehicles (EVs), which are a key consumer of lithium.

Reuters reports that Albemarle, the world's largest lithium producer, is “concerned” about current lithium prices but that it believes long-term demand will remain “strong”.

The company, which operates across the Americas, Asia and Australia, cut staff and paused expansion projects in January after prices fell more than 81% in 2023.

But the link between lithium and high-energy applications such as EVs suggests that demand might eventually rebound, as market conditions stabilise and growth in electric mobility continues. 

"Lithium prices are concerning," Eric Norris, head of Albemarle's energy storage business, told the Fastmarkets Lithium Supply and Battery Raw Materials Conference in Las Vegas. "But I believe the energy transition is inevitable. Our long-term demand projections for lithium are just as robust as they've always been."

But what has caused such a drastic downturn? Here are three factors that have contributed to the crash in lithium prices.

Oversupply of lithium in the market

The primary driver behind the lithium price collapse is a significant oversupply in the market. In anticipation of a booming demand forecasted to outstrip supply by 2028, mining companies aggressively ramped up production. Between 2022 and 2023, the global lithium supply surged by 31.3%, and in the following year, it grew by another 25%. This increase brought the total supply boost to nearly 50% in just two years. However, the expected demand did not materialise at the predicted rates, leading to a glut of lithium on the market.

Stagnation in major EV markets

The demand for lithium largely hinges on the EV market, particularly in major economies like the USA and China, which together consume about 70% of the world's EV batteries. 

However, both markets underperformed relative to expectations. In China, the removal of EV subsidies at the end of 2022 made electric cars more expensive, significantly dampening consumer interest. Similarly, in the US, high federal bank rates led to increased borrowing costs, leaving consumers with less disposable income to spend on luxury items like electric vehicles. 

The reduction in EV sales directly impacted the demand for lithium batteries, exacerbating the effects of the already existing oversupply.

Rise of alternative technologies

The emergence of sodium-ion batteries as a viable alternative to lithium-ion ones is also a factor. Unlike lithium, sodium is abundant and does not require environmentally damaging mining processes. Sodium-ion batteries are cheaper, have a longer lifespan, and are less flammable than their lithium counterparts. 

Their introduction has provided manufacturers and consumers with a lower-cost, sustainable alternative, further pulling demand away from lithium-ion solutions. 

However, it's worth noting that sodium-ion batteries are larger and less energy-dense, making them unsuitable for compact applications like most electric cars.